But there are bigger picture items to consider too – things like retirement planning for a couple instead of two singles, and tax optimization for people “married filing jointly” rather than “single.” Marriage is a beautiful beginning of a life together…and also a time to review your overall financial picture.

source: Fuschia Foot

7 Things to Review When You Say I Do

1. Retirement account eligibility: If you and your new spouse make over $179,000 combined, you cannot contribute to a Roth IRA. Get around this by contributing to a traditional IRA instead, then converting to a Roth IRA.
2. Retirement savings strategy: Now that you have two people in your household, your expected expenses in retirement will likely change.You also have two incomes to use for saving, and, with any luck, two workplace retirement plans to take advantage of. If you are planning to put less than the maximum away in your 401ks, consider weighting the contributions in favor of the spouse who has the better plan (i.e., better company match and/or more investment options). For instance – if you will contribute $20,000 total and you get a 50% match on all contributions but your spouse gets a match on only the first 2%, max out your 401(k) and contribute the remaining $3,500 (in 2011) to your spouse’s 401(k). If you’re not totally combining your finances, you’ll have to work out the finer details of how to split other bills, but attacking retirement savings this way will still help you amass more money together in the long run. To protect yourselves in case of a divorce, you might want to consider having a lawyer draw up an agreement helping you split both partners’ accounts in a fair manner if you are contributing unevenly.
3. Tax implications: You probably want to change your withholdings when you get married so that you are sending the right amount of money to the IRS and keeping the right amount for yourself and new spouse. If one of you has significant non-paycheck income (or deductible expenses), the tax burden will be drastically different than what the other spouse is used to. Play around with a tax calculator to estimate your tax burden for the upcoming year – and remember that whether you get married on January 1 or December 31, the IRS considers you married for the entire calendar year and taxes you accordingly.
4. Student loan interest deductions: You can deduct all or some of the interest paid on student loans IF your income is less than $75,000. Once you get married, you can only deduct interest if your combined income is less than $150,000. So if you’ve been favoring other debt repayment over student loans because of the interest deduction, make sure that deduction still exists – or rethink your strategy.
5. Insurance: When you’re single, you probably don’t need much in the way of life insurance, especially if you are debt-free. But once you’re married, you and your spouse will probably grow to be dependent on both salaries almost immediately. So make sure each spouse has enough life insurance to replace his or her income for at least 10 years – more if you have children or large amounts of debt. And while you’re at it, make sure each of you has adequate disability insurance too!
6. Debt repayments: If you each have debt, you might be attacking it individually in a logical order that makes sense for you. But if you combine your finances completely after marriage, you might want to change up your debt repayment strategy – if you have student loan and balance transfer debt at 6% or less, and your spouse has high-interest credit card debt at 18%, you should tackle all of the higher interest debt before sending anything but minimum payments to your own.
7. Beneficiaries: I’ve said it before, but I will keep repeating it until I am sure everyone gets it: named beneficiaries on financial accounts supersede any written wills. So congrats on remembering to write wills that name the other spouse as your sole beneficiary – but if your 401(k), life insurance policy or anything else lists your parents, niece, best friend or Joe Schmoe as the beneficiary, your spouse will not be able to claim any of that money. If you and your spouse agree that you will not be each other’s main beneficiaries, that’s fine (although some states may require the disinherited spouse to sign an acknowledgement). But if you think your spouse will inherit all your assets in the case of your untimely death, make sure you take the steps to make that belief true.

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I’m a little embarrassed to admit that I’m still nowhere close to unpacked from my move. And I’ve put on more weight than I’d like since returning to the land of Mexican food and driving EVERYWHERE. Finally, despite living at home for the last four months, I’ve spent more and saved less than I should have. So this month, I’m working on a reset: spending some time getting things in order, figuring out how I want to deploy my resources and deciding what I want my life to look like come 2012.

9 Steps to a Reset

If you want to join in my attempt to “start over” this fall, I invite you to follow the steps below – I plan to work on at least two per week for the next month or so.

1. Revisit outstanding goals: I plan to revisit the goals I set for myself at the beginning of the year to see which ones I’ve accomplished, which are outstanding and which I am no longer pursuing.
2. Create a diet and exercise plan: Texas has been good for me in almost every way – the one way it’s bad is its impact on my waistline! I plan to exercise at least 3 times per week, attending at least two yoga classes and doing at least one cardio workout on my own. I also plan to do some research to determine an appropriate amount of calories to consume each day, and track my food intake religiously until I get a handle on how much food that really is. I will document my progress (this is a good format) towards this so that I can look back and see exactly what I am doing right and wrong.
3. Organize my room: As I’ve said, I haven’t really unpacked. Doing so properly will mean cleaning out my closet, getting rid of clothes I haven’t worn in years, purchasing at least one additional piece of furniture and deciding what to leave in temporary storage in my parents’ garage.
4. Create web and hard-copy calendars: I have So. Many. Things. to do over the next couple of months. A boyfriend and brother living 4 hours away only add to the craziness of weekend plans. To make sure I have a handle on what’s coming up, I need to get everything down in writing, and make sure I duplicate it so that I can access my calendar via my computer or in hard-copy at any given time.
5. Develop a daily schedule: I haven’t really mentioned it, but I’m studying for an entrance exam in case I decide to go back to school. I also am trying to add exercise to my schedule, and want to spend at least 30 minutes organizing my room several days a week. Plus…tv is coming back and I’m a sucker for a good reality show. Not to mention, I have a full-time job that seems to be trending closer to 50-hour weeks than 40 lately. All in all, it’s clear that I need a good plan for how I’ll spend the hours between work and bed each night. I plan to write this down and stick to it – it will help me make sure I get everything done while still getting plenty of sleep and keeping my sanity!
6. Create an investment plan: My company switched 401(k) providers recently, and I’m not too happy with fund options. I do my own investing in my Roth IRA, and think I should switch around some of those investments to make up for underweighted sectors in my 401(k) investments. Since I’m what my friends deem a “financial type,” it’s probably pretty surprising that I don’t have a very defined strategy for my Roth investments – I use some combination of quarterly research, past performance and intuition to pick my investments. I plan to crunch some numbers over the next month to really get a plan for strategically allocating my portfolio across different sectors and between different assets such as stocks and bonds.
7. Revisit my savings goals: I have at least 3 long-distance weddings plus my college reunion coming up between now and next June. I also save for things like Christmas presents and known family vacations in my SmartyPig accounts. I’ve gotten a little lazy about setting up dedicated accounts for each separate item, but that really is the best way to manage these expenses. So I need to spend some time creating a budget for each planned trip or other goal, and then set up the goals in SmartyPig.
8. Revisit my debt repayment plan: My student loan interest rate changed recently, and I also took on a car loan. Living at home also means I have more money to throw at debt reduction – but I need to crunch some numbers to see what I want to attack first.
9. Close dormant bank accounts: I’ve been moving money around due partially to my move and also to new bank fees at two places where I previously held accounts. That means I have lots of dormant accounts out there that I need to close.

The financial impact

Obviously numbers 5 - 9 are directly related to my finances, but I think that 1-4 will also be helpful toward improving my overall financial health. A good calendar of upcoming events will make sure I am saving appropriately for upcoming expenses, and budgeting properly for day-to-day expenses. A daily calendar will leave me less idle time in which to spend money. A diet plan will mean less money on restaurants, snacks and late-night desserts. And a commitment to exercise will mean that I finally start USING the gym membership I’ve been paying for since June. All in all, I might spend and save similar amounts to what I’m doing now – but the outlays will be more targeted, deliberate decisions. I also know that the reset in general will make me feel a little better about life in general – and when I’m happier I always spend less money! 

I’ll try to post an update later this fall, but in the meantime you tell me: what would you like to reset this month?

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As it turns out, not continuing with school was a better decision than I could have ever known. Graduating and looking for a job in 2007 instead of 2008 or 2009 meant that I was looking at a time when entry-level jobs were plentiful. I’ve been thankful for the fact that I knew what I would be doing well in advance of graduation – and for the first couple of years, I didn’t really regret deferring an advanced degree.

Fast forward four years and I have the learning bug. I miss the stimulation of professors, the joy of being in a room full of motivated people, the excitement and promise of a new semester. In the back of my head I did always think I would go back to school at some point. Years ago, a college degree was enough to set you apart from people your age. These days, undergraduate degrees are more plentiful than ever, and advanced degrees are almost required for some of the best jobs. Plus (if I’m being really honest)…I’m just a little bit jealous when Facebook brings news of yet another friend/colleague/former classmate who has made the choice to go back to school.

So…I’ve been thinking about going back to school.

Making the Money Work

While I’d like to think I do a pretty good job of saving and investing, even thinking about going back to school is a little overwhelming from a financial standpoint. If I go full-time, I’d most likely need to quit my job and lose nearly all of my income. If I go part-time, I’d still probably have to cut back hours and thus lose some of my income – plus I’d be prolonging the number of years of school spending.

Spending more while earning less. Well Heeled wrote recently about living on 50% of her usual income because of deciding to go back to school, and how it’s impacting her decisions on other life events, like her honeymoon. And that’s the problem with REALLY big life decisions – they often require you to spend more than usual at the precise time you’re earning less than usual. Going back to school is one example, but people find themselves in similar circumstances when they want to take time off to travel, or become a stay-at-home parent, or make a cross-country move (unless you’re really lucky and get to keep your job, like me!).

Student loans. When it comes to paying for school, most people are nearly forced to take out student loans to cover the cost. Scholarships/grants for graduate programs are much less plentiful than those for either undergraduate or doctoral students. Some combination of lower salaries, higher expenses, lifestyle inflation and ever-expanding savings goals means most people don’t have the cash to pay for both tuition and living expenses out of savings, especially if they’ve been working for only a few years. Those who have worked for more years may have a little more of a cushion – but may also have mortgages, children, and other things that I still consider  “grown-up expenses.” 

Tapping retirement accounts. One funding option I do have is to tap into my retirement accounts.  Canada has a pretty neat system where you can borrow from your retirement accounts for school, and pay yourself back over time - but unfortunately I’m not in Canada! I’ve been diligently saving in a Roth IRA since my first paycheck, and education is one of the things that allows you to take a tax-free Roth IRA withdrawal. But of course using retirement savings now means it’s not available later…and it seems wrong to withdraw from my retirement funds during a time when I won’t be able to contribute to them.

Should I Go Back to School?

The bottom line is, going back to school will have a major impact on my finances, even if I go in-state, continue living at home to save money, and do the very best I can to cut other expenses. So…what’s a girl to do? I’d love to go back to school, but don’t want to take on a huge debt load. I’m not sure I want to use my savings and sacrifice other goals like buying a house… plus my savings wouldn’t go very far if I did a full-time 2+ year program. And I generally think that raiding retirement accounts for anything other than retirement or a TRUE emergency is a pretty bad idea.

What would you do?

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These examples suggest that there is an innate balance to things, and my own experiences suggest the same—I have experienced this ‘balance’ on a more micro-level (in my own life). For example, sometimes when I think a mean thought about someone, or say something mean, I immediately ram my knee into a coffee table or stub my toe on our bed (which has been in the same spot for over two years now). Each time this happens, I look up to the sky with a little bit of pain and an “I-deserved-that” look on my face. Have you ever experienced this?

Balancing the Financial Scales in Life

This innate balance shows up in my finances also. I can’t help but wonder if a financial puppeteer—clad in a clown suit and holding a bank ledger—is towering over my life, taking note of all the freebies and discounts I have received in the last few years, and deciding that it is my time to pay back the universe and balance the scales again.

Let me give you some examples:

1. Negotiating a Lower Home Price: We negotiate our house buying price down by $800 due to some very old AC and heating units. During the purchasing process we were under the impression that the kitchen refrigerator was included in the price (you can see where this is heading). On closing day we found that the refrigerator was in the contract to be taken by the previous owners, and so we had to buy a new fridge. The stainless steel refrigerator we decided to purchase at our local Sear’s scratch and dent store was for $800.
2. Receiving the Homebuyer Tax Credit: One week after receiving our first time homebuyer’s tax credit, we put the money towards paying off debts. Right after paying down our debt I get a call from an apartment I lived in over three years ago and they claim that I owe them $3,400. Oh yeah, then our other vehicle breaks down.
3. Receiving a Merit Bonus: One week after receiving a small merit bonus the following occurred, eating up all of the bonus (thank goodness we received it!): association fees were due (and we thought we could pay them through escrow, which we abruptly found out we could not) and a speeding ticket for 5 miles over the speed limit on our way to Thanksgiving Dinner cost us an additional $225.

Perhaps I deserve this rebalancing of the system; if you take a look at my list of freebies from 2009 totaling over $1300, I certainly made off with my share of products and services for free. Maybe my actions indirectly led to another person losing their job, or by not circulating my money more freely I have added to the problem of the recession instead of being part of the solution. Either way, I have been left with some questions.

At the end of the day, do I actually save money and these extra expenses were going to creep up anyway (in which case I should be very thankful that I put all of the effort into saving money), or in the karmic balance of things, did I tip the scale too far in my favor and now it’s time to ante up, (in which case all of my efforts were in vain as I would have saved the same amount in the end anyway)?

Anyone have any thoughts? Have you had any karma in your life (financial or otherwise?)

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Be honest with…

1. Your Insurers: Your house and your income stream are most likely your two most valuable assets. So it stands to reason that your home insurance and life and/or disability insurance are your most important insurance policies. But if you lie to your insurers, they can cancel your policy or deny your claims just when you need them most. So be honest when filling out insurance paperwork. Telling the truth might cost you a few more dollars in premiums, but it will be worth it in the end. It would be terrible for your family to file a life insurance claim and be denied a payout in the midst of their grief. Make a commitment to tell the whole truth when filling out insurance applications, and revisit the applications every five years or so to make sure they remain accurate.
2. Your Employer: As stated above, your income stream is one of your most valuable assets. And since lying to your employer is grounds for termination, it’s probably better not to do so! You should be 100% honest in every interview, telling the truth about skills and experience and divulging up front anything that could get you in trouble later – this includes a criminal history, past employer grievances, other jobs, potential conflicts of interest, etc. If you do something wrong at work, own up to your mistake – don’t try to lie to get out of it. Be honest about your current salary when starting a new job and be reasonable about what you can command in a new position. Honesty is hard, especially when a seemingly harmless fudging of the truth could help you land a larger starting salary or end your membership among the ranks of the unemployed. But if you get caught later, you could find yourself unemployed AND labeled as dishonest, making it harder to find another job.
3. The Government: Like it or not, the government has the potential to have a big impact on your financial life. If you lie on your taxes, you can face penalties of up to .5% of the unpaid taxes each month you fail to pay, not to mention jail time – and if the fraud is intentional, there is no statute of limitations. You can also end up in big-time financial trouble if you lie to the government in other areas – unemployment fraud, Medicare fraud and Social Security fraud are serious crimes with serious implications. In addition to owing penalties for the benefits you didn’t deserve, you may also lose out on benefits that are rightfully yours. So pay what you owe, use what you earn and pledge 100% honesty when it come to your government dealings.
4. Your Financial Planner: A financial planner can help you get out of debt, invest wisely, optimize your taxes and protect against loss. But a planner is only as good as the information he or she is working with. If you understate your debts, overstate your assets or otherwise fudge vital information, your “personalized” plan may actually work against you. A financial planner is bound to confidentiality and no matter how bad your situation is has likely seen worse. A doctor needs a full medical history (no matter how embarassing) to diagnose a treat a health problem. Likewise, a financial planner needs the good, bad and ugly to devise a plan that works for you.
5. Your Spouse: If you’re married, it is vital that your spouse know all there is to know about your financial life, regardless of who earns the most money or takes care of day-to-day financial decisions. If you tend to serve as the family CFO, help protect your spouse by sharing information on income, assets and major bills with him or her. If your spouse tends to handle family money matters, make a date to sit down and avail yourself of the information; you are responsible for it. You must protect yourself in case of your spouse’s sudden disability or death – without knowledge of your assets and liabilities you will be even more overwhelmed at an already-distressing time. It is vital that you and your spouse trust each other when it comes to financial issues. And if you don’t trust your spouse when it comes to non-financial matters, there’s even more reason to make sure you know where you both stand financially, so that you can protect yourself in case of divorce – a financially and emotionally draining experience and one with potential long-term financial implications for either spouse. If you’re not married, you should have someone you can trust at least basic information to in case of your unexpected incapacitation or death. Consider creating an “In case of emergency” document with all of your account numbers and online log-ins to help your next-of-kin access your assets if necessary.
6. Yourself: While this last one may not be as concrete as some of the others, it is vital that you are honest with yourself. Being honest with yourself about your current financial state will help you improve that state if necessary. Until you are ready to face the numbers when it comes to debt and truly assess and reign in your spending, you will not be able to successfully get out of debt. Being honest with yourself in other matters can have a financial impact as well – if you feel that you could have a health problem but are afraid to visit the doctor and face reality, a belated diagnosis could cost you much more in the long run. If you know you are not cutting it at work but are afraid to have an honest conversation with your boss about how to improve, you could end up burying your head right up to the point of a layoff. Whatever the situation, be honest with yourself about where things in your life stand – your wallet will thank you later.

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Whatever your goals are, you will inevitably face setbacks – you’ll give in to a moment of weakness, or just find that an unexpected event wreaks havoc on your plans. Life happens. But the important thing is not to let those setbacks impede future progress any more than absolutely necessary. Instead, follow these five steps to bounce back.

Bouncing Back

1. Assess how much damage was done. If you simply blew your food budget by $5 on the last day of the month, you can probably just relax and start anew the next month. If you spent triple your monthly shopping budget on the first day of the month, though, you might have a bigger problem. So figure out how big of a setback you are really facing.
2. Ask yourself why the problem happened. Was your setback a result of something that you could control? Were your goals unrealistic? For instance, you probably can’t save $1,000 a month if you bring home $3,000 and spend $1,500 on housing. Think about what lessons you can learn from this setback – how you can change your plans, behavior, outlook, or some combination of the three to set goals that are attainable without being easy.
3. Determine if the setback is easily fixable. If you were $150 over budget in one category, but $200 under across other categories, you can kind of “reassign” your dollars and end up ok. If you “overshopped,” see about returning some things you haven’t used yet. And if you have an emergency fund but suddenly find yourself needing new tires months before you thought you would, there’s no need to worry about where the money will come from – that’s what emergency funds are for. But if there’s really a one-time event that just leaves you a little short of reaching your goals, let it go – almost all goals can be postponed briefly.
4. Put steps in place to get back on track. If you fell $200 short of your monthly debt repayment goal, see if you can squeeze $50 per month from somewhere else for the next four months. A no-spend weekend can be just what you need to stave off disaster. If your problem was that you just didn’t have an adequate emergency fund, take steps to build one. If it truly turns out that your goals were just too hard to reach, see if your debt repayment can be stretched a month or two further, or that family vacation delayed to winter break instead of summer. And if the setback was something you should have foreseen and planned for, work on how you can do that next time.
5. Move on. Don’t dwell on this one setback. Chances are it’s not going to ruin you financially. But dwelling on it could have emotional and ultimately financial ramifications. So put it behind you, and resolve to do better next month.

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Everyone has their own scary age when it comes to life – details on mine are for another post! But when it comes to finances, 25 is definitely my scary age. And since I turned 24 a month ago, it’s quickly approaching.

Why 25 Scares Me

We’ve all seen those graphs in blog posts and news articles encouraging us to save at an early age, and showing us the difference between starting a savings plan at two ages – the younger age is ALWAYS 25. Many online retirement calculators start at 25. What that means to me is that the years before 25 are freebies – you can mess up financially, and still have plenty of time to bounce back. But after 25, you need to save. And plan. And it all matters.

Since I graduated from college and started learning about personal finance, I’ve always been younger than 25. Even if I’m not doing things 100% correctly, I tell myself it’s ok because those were “bonus” years. But once I turn 25, the stakes (in my head at least) are just a little bit higher – and if I’m not saving enough, or choosing the right investments, or generally not making the “right” decisions, it could really have an impact down the road! So I need to learn more about investments, save a higher percentage of my paycheck, and knock out my student loan. When I think about doing all that and the financial ramifications of starting grad school and buying a house in the next few years, I can really work myself into a tizzy!

How I’ll Prepare

Here are some things I’ve already done or plan to do to combat my financial anxiety about turning 25:

• Earn side income above and beyond my normal paycheck, and use it to eliminate my student loan.
• Increase my Roth IRA/401(k) savings every time I get a raise. (Yes, you can have a 401k and an IRA at the same time.
• Create my own “dollar plan” that maps out some mid- to long-term goals, and their financial ramifications.
• Create a long-term investment plan with a target asset allocation and growth projections.
• Remember that 25 is just a number – good habits are the most important, and less-than-optimal saving or investing is better than none at all.

What it Means for You

I’m guessing that everyone has their own financial scary age. Maybe yours is the year you plan to retire. The years between your retirement and Medicare kicking in. The year you have a child, or the year your child starts college.

No matter what your financial scary age is, it’s probably tied to a certain event that you can plan for. So start now. Decide how much you need to save to meet a certain goal, how you can step up your debt elimination plan to get rid of payments sooner, or what kind of self-education you need to stay on the right track. Talk to your spouse or child, if applicable, and work together to combat some of the financial stressors in your life. Control what you can, and let go of the rest. Know that if you’re reading sites like this one, you’re probably ahead of a whole lot of people in similar situations.

And if all else fails, have an extra big piece of cake – and a few birthday freebies -on the day of your scary-age birthday!

What’s your scary age, and what are you doing to prepare for it? Tell us in the comments!

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I completed this exercise three years ago to make sure that my work life balance and other aspects of my life were in line with my priorities. I decided it was time to revisit the exercise. Here’s what my pie looks like right now.  

I think it’s a pretty good looking pie as far as my priorities in life. Here’s some of the highlights:

• Children is my time alone with the kids; Family time is the time spent with all four of us together.
• Personal time includes time by myself and time alone with my spouse without the kids.
• Leisure includes recreation. I could probably stand to get a little more recreation in!
• Business time is primarily devoted to My Dollar Plan right now.
• Household & Money includes making dinner, grocery shopping, paying bills, etc.

As you know, I’m headed back to work. Starting next week, I’m going to need to squeeze in another 32% of my time to make room for my job. Essentially, I’m going to have to take my happy pie and squeeze it into 67% of my time going forward.

Making Adjustments

Of course, it’s not just going to slide in neatly. Some categories will need to adjust more than others. There’s only so much time in a day, and my family comes first. However, it’s important not to lose site of making personal time for yourself and your spouse too. I’ll probably need to scale back on the business too to make it all fit in. It’s important that I not only achieve work life balance, but also balance in my time spent away from work.

Part of a successful strategy towards life can also be applied towards aspirations of wealth. Don’t focus on something 100% of the time or you might miss out on other important parts of life. When one of my ideas ends up taking too much time, I cut it off… like the couponing that started taking too much time. This helps keep my life in balance.

Creating Your Own Life Mix Pie Chart

This is a fun exercise to do for a week. Track how many hours you spend on things and total it up at the end of the week. Calculate your percentages and draw a pie chart. Does it match your priorities and values? If not, what do you have to change?

Recently The Digerati Life wrote the Supermom Myth. She identified some categories that might help you get started:

Family: we enjoy our kids and hope to be good parents
Health: we’d love to live a productive, comfortable existence
Money: we aim to be financially independent
Personal Time: how about some time to ourselves?
Friends and Community: we seek social interactions
Church (for a good number of us): we nurture our spiritual side
Leisure and Recreation: we’d like some time for play
Business: we hope to build something both fulfilling and profitable
Job: we’re looking to further our careers
Household Obligations: we’ve got a house to run

Action Plan

I’m going to have to be more efficient with some of my interests if I want my chart to continue to reflect my priorities. Since some of my business time will be scaled back I’m going to make some adjustments at My Dollar Plan. One of the changes you will likely see is posts on weekdays only. I might respond a little slower to emails, however, I will still read every single one! Hopefully you’ll get your dose of my babbling during the week. On the weekends, you can work on making your life mix chart and I’ll be working on spending quality time with my family!

What does your pie chart look like?

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